We extend the resutls for the problem of option replication under proportional transaction costs in \cite{Nguyen} to more general frameworks where stochastic volatility and jumps are combined to capture market's important features. In particular, we study the hedging error due to discrete...

We formulate a bivariate stochastic volatility jump-diffusion model with correlated jumps and volatilities. An MCMC Metropolis-Hastings sampling algorithm is proposed to estimate the model´s parameters and latent state variables (jumps and stochastic volatilities) given observed returns. The...

The model of Bates specifies a rich, flexible structure of stock dynamics suitable for applications in finance and economics, including valuation of derivative securities. This paper analytically derives a closed-form expression for the joint conditional characteristic function of a...

In this paper we propose a simple non-parametric calibration procedure of option prices based on the short term asymptotics of implied volatilities. The approximation formula is derived for a general one factor jump-diffusion specification nesting most of the theoretical models typically used...

Many derivatives prices and their Greeks are closed-form expressions in the Black-Scholes model; when the terminal distribution is a mixed lognormal, prices and Greeks for these derivatives are then a weighted average of these closed-form) expressions. They can therefore be calculated easily and...

We derive a closed-form asymptotic expansion formula for option implied volatility under a two-factor jump-diffusion stochastic volatility model when time-to-maturity is small. Based on numerical experiments we describe the range of time-to-maturity and moneyness for which the approximation is...

We formulate a bivariate stochastic volatility jump-diffusion model with correlated jumps and volatilities. An MCMC Metropolis-Hastings sampling algorithm is proposed to estimate the model’s parameters and latent state variables (jumps and stochastic volatilities) given observed returns. The...

We formulate a bivariate stochastic volatility jump-diffusion model with correlated jumps and volatilities. An MCMC Metropolis-Hastings sampling algorithm is proposed to estimate the model's parameters and latent state variables (jumps and stochastic volatilities) given observed returns. The...